MLR 2017 Regulation 21 Independent Audit for Scottish Law Firms
Compliance Services For Law Firms in Scotland
The MLR 2017, regulation 21 requires a regulated Firm to consider, as part of the risk assessment process, if an Independent Audit (Regulation 21 Audit) is required.
The Law Society of Scotland and Legal Sector Affinity Group (LSAG) has given a strong indication to Law Firms that it expects an independent audit to be performed in all but micro firms.
As a result of the regulator’s position, while not performing a Regulation 21 Independent Audit may not strictly be a breach of the MLR 2017, it is likely to attract criticism from the Law Society. Our guidance is therefore for Firm’s to perform an Independent Audit at least every 2 years.
As the audit is effectively an audit of not only the Law Firm itself but the Money Laundering Compliance Officer and Money Laundering Reporting Officer, who, are expected to be Senior Managers the Independent Audit if often best outsourced.
There are often questions on what constitutes ‘Independent’. Regulation 21 (1) (c) of the MLR 2017 provides guidance on this point. To summarise, a Firm is allowed to carry out an audit internally, but it should not be carried out by the MLRO or the MLCO, or anyone else responsible for maintaining the AML function within the firm. Typically, in-house employees with sufficient expertise, who would be capable of undertaking an audit of this type are those who have day-to-day responsibility for designing, implementing and monitoring the application of the firm’s anti-money laundering policies and procedures. Therefore, it could be difficult to comply with the ‘independent’ requirement under Regulation 21 or the MLR 2017.
As a body that is independent of the Firm, RACO would qualify as being truly independent and be able to meet the requirements of Regulation 21 of the MLR 2017.
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Our Independent Audit
Our Regulation 21 Independent Audit includes: –
- Discovery – An initial discovery meeting to scope out and agree on the approach of the review and the affected staff, departments and processes.
- Review of Current Policies Controls and Procedures (PCPs) – A full review of each of the documents that make up the Firm’s PCPs, which is measured against the requirements of the MLR 2017 and the guidance provided by the Legal Secor Affinity Group (LSAG).
- Registers and Cases – A review and analysis of the firm’s High Risk and Suspicious Activity Register.
- Staff and Officers – Interviews with staff to consider the practical application of a firm’s AML PCPs and to establish understanding and knowledge and identify any knowledge gaps.
- File Reviews – Optional file reviews to consider the application of a firm’s MLR 2017 PCP requirements at client and matter level.
- Reporting – A formal report detailing the information obtained in the review, the current approach adopted by the firm and identifying any gaps with a series of recommendations and solutions. The report will cover:
- PCP Analysis
- Application
- Analysis of trends
- Recommendations
- Presentation – An online presentation/discussion of the findings to the partners.
The Regulation 21 Independent Audit extension will further include a review of the approach adopted by the firm for compliance with AML regulations.
With pricing starting from £3000, we consider this to be an affordable solution for Firms. This price will also be reduced if a Firm is part of other compliance service products.
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Scottish Law Firms
If your firm is regulated by the Law Society of Scotland and you are reviewing your compliance arrangements, considering outsourced support or preparing for inspection, please call us on 0203 985 8550, complete the online enquiry form below, or email us info@regulationandcomplianceoffice.co.uk